HYANNIS – Fifth Barnstable State Representative Steven Xiarhos recently filed legislation to prevent state taxation of economic stimulus benefits that small businesses have received from the federal government during the ongoing COVID-19 pandemic.
Xiarhos said in a release that funds that businesses received as part of loans from the 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Paycheck Protection Program (PPP) can be in part or completely forgiven.
However, he said that the loan proceeds could be seen as business income under state tax law, and so businesses could need to pay state income tax on the amount received.
Legislation filed by Xiarhos, An Act Providing Financial Relief to Small Businesses During the COVID-19 Pandemic, would counter that by creating a state tax deduction for income businesses received as a result of PPP loans which were forgiven.
“Thousands of Massachusetts businesses have received millions of dollars under the program, helping them to stay in business and keep people employed. In order to have those loans forgiven, businesses need to show that they spent the money on payroll and other qualifying expenses. I believe it is inconsistent with the goals of the CARES Act for Massachusetts to impose a tax on these proceeds if they are forgiven by the federal government,” said Xiarhos in a statement.
“The purpose of this money was to get every dollar possible into the hands of the employees who depend on the proceeds during the pandemic, and we should not be siphoning a tax off the top of those benefits.”
The legislation is expected to be assigned to a legislative committee and a hearing will be held sometime in the coming months.